K3 made excellent progress over the year as results demonstrate. Revenue for the 12 months to 31 December 2007 increased by 25% to £34.15m and adjusted profit before tax rose by 78% to £4.72m, with adjusted earnings per share increasing by 60% to 16.8p.  Profit before tax rose by 43% to £3.68m with earnings per share increasing by 41% to 13.4p.

Both legs of the business, the Retail Software Division and the Manufacturing Software Division, performed well.  In addition, during the year, we acquired three complementary businesses, two in manufacturing software and one in retail software.  These made partial contributions to this year's results but, more significantly, they greatly enhance prospects for the Group for 2008 and beyond.

The acquisition of McGuffie Brunton Limited ("MBL") in April 2007 transforms our Manufacturing Software Division.    As the only other domestic distributor of SYSPRO, it makes K3 the sole supplier in the UK for a system which is widely recognised as the leading software range in mid-tier manufacturing.  Just before the end of the financial year we acquired Index Computer Systems Limited ("Index"), a leading reseller of Microsoft Dynamics AX (Axapta) suite of business software and a Microsoft Gold Partner.  Index takes the Manufacturing Software Division into the complementary field of ‘process' manufacturing and, as one of the fastest growing solutions in the market for larger manufacturing companies, Axapta opens up exciting new opportunities for the Division.

Prospects for the Retail Software Division have been enhanced with the purchase of Landsteinar Nederlands BV ("Landsteinar") in August 2007.  Based in Holland, Landsteinar distributes the same software as our UK business and so is a complementary business in an area we understand.  Importantly, it also gives us a European footprint. 

The three acquisitions we have made considerably strengthen the Group, adding critical mass to our existing operations, increasing our presence within our chosen markets sectors and broadening our market opportunities.  We continue to look for complementary acquisition opportunities that will enhance our existing product range and skills or bring additional routes to market. Our product range is now also sufficiently broad to consider the acquisition of ‘feeder' businesses, with established customer bases in our chosen sectors.  These will provide predictable, recurring income streams but also deliver opportunities for cross-selling as customers upgrade their existing software solutions with newer Microsoft products.

Tom Milne

Non Executive Chairman